Wednesday, December 17, 2014

Markets advance ahead of FOMC announcement

Dow rose 66, advancers over decliners 5-2 & NAZ went up 18.  The MLP index had sharp recovery, rising 9+ to 440, & the REIT index added 1+ to 320.  Junk bond funds recovered after recent heavy selling & Treasuries pulled back following recent gains.  Oil slid lower in the 56s & gold inched higher, attempting to go over 1200.

AMJ (Alerian MLP Index tracking fund)

CLK15.NYM...Crude Oil May 15...56.24 Down ...0.92  (1.6%)

GCZ14.CMX...Gold Dec 14......1,198.70 Up ...4.80 (0.4%)

3 Stocks You Should Own Right Now - Click Here!

Photo:   Bloomberg

The cost of living in the US fell in Nov by the most in almost 6 years, depressed by falling energy prices that signal inflation will stay below the Federal Reserve (FED) goal well into 2015.  The consumer-price index dropped 0.3%, the most since Dec 2008, after being little changed the prior month, according to the Labor Dept.  The forecast called for a 0.1% fall.  Costs rose 1.3% over the past year, the least since Feb.  Excluding volatile food & fuel, the core measure rose at a slower pace than in Oct.  Persistently low inflation allows FED policy makers, scheduled to end a 2-day meeting today, to exercise patience in raising the benchmark interest rate that they’ve held near zero since 2008.  Plunging fuel costs also will free up money that households can spend on other goods & services, bolstering the economic expansion.  Core prices rose 0.1%, matching the forecast & follows a 0.2% advance the previous month.  Gains in rents, medical care & airline fares were almost completely offset by the biggest drop in clothing costs in 16 years & the largest fall in prices for used cars & trucks since 2012.  The core CPI measure increased 1.7% from Nov 2013, following a 1.8% rise in the prior 12-month period.  Energy costs decreased 3.8% from a month earlier, led by a 6.6% plunge in gasoline, the biggest since Dec 2008.  The FED’s preferred price gauge, linked to consumer spending, rose 1.4% in Oct compared with the same month last year & hasn’t been above the central bank’s 2% goal since Mar 2012.

Consumer Prices in U.S. Decline by Most in Six Years on Fuel

FedEx posted a quarterly profit that trailed estimates based on a prediction of bigger savings from the global collapse in fuel prices.  EPS of $2.14 missed the $2.25 estimate, a projection that rose in recent weeks on expectations of lower spending on diesel & jet kerosene.  While tumbling oil prices promise to boost profits for many transportation companies, FDX found itself pinched as its fuel bill declined more slowly than did crude.  Aircraft maintenance expense also rose.  Revenue rose 4.7% to $11.9B, while EPS for fiscal Q2 climbed 36% from $1.57 a year earlier.  The company also reaffirmed its earlier full-year EPS forecast of $8.50-$9.  That compares with the $9.10 forecast by analysts.  “The year-over-year reduction in surcharge revenue largely offset the benefit of lower prices,” CFO Alan Graf said.  Changes in the fuel surcharge lag behind price movements by 6-8 weeks for its Express & Ground segments, so the Nov surcharge was based on Sep prices, Graf said.  The surcharges also don’t adjust as long as prices remain within a certain band & the company’s fuel purchase contracts aren’t based on daily price swings.  As a result, fuel costs didn’t fall as much as spot prices during the qtr, Graf said.  The stock sank 6.01.  If you would like to learn more about FDX, click on this link:

FedEx Profit Misses Estimates on Maintenance, Fuel Fees

FedEx (FDX)

Russia will keep its crude oil output steady next year & plunging prices will stabilize, Energy Minister Alexander Novak said, reiterating comments made almost 3 weeks ago that nation won’t adjust supply to halt a rout.  The world’s largest crude producer’s output will be similar to this year’s 10.6M barrels a day, Novak said.  Brent, the global benchmark, fell almost 50% since the end of 2013, contributing to a currency crisis in Russia, which relies on energy for ½ of its budget.  By keeping oil output unchanged, Russia is matching a strategy by OPEC, which said it won’t curb production to tackle a global surplus.  The gov planned to hold a meeting yesterday to discuss the nation’s deteriorating financial situation.  Sanctions imposed by the US & EU over the conflict in Ukraine spurred the worst capital outflows in 6 years as the economy nears recession.  “The price will stabilize itself,” Novak said.  “Some investment projects by oil companies may be reconsidered, but so far they have not adjusted anything.”  He has said the price will recover in the medium term & Russian output will remain flat.

Russia Sees No Need to Cut Oil Supply With Prices to Stabilize

The stock market is very oversold & a bounce back was expected.  But this just represents a nibbling kind of bargain hunting.  Everybody is waiting for Janet to speak in a couple of hours.  Chances she will utter soft & kind words which will add to the rally.  If  markets like what they hear, tomorrow's trading will give a better idea if the buying has legs.

Dow Jones Industrials

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